Section 45(2) of the Income Tax Act
Income-tax Act, 2025: s.67
Section 45(2) falls under section 45 of the Income-tax Act, 1961, which corresponds to section 67 (Capital gains) of the Income-tax Act, 2025.
Read section 67 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 45(2) is CIT v. Mohanbhai Pamabhai (91 ITR 393), cited in 31 of the 238 judgments on BharatTax that turn on this section.
Leading authorities on Section 45(2)
The distribution of capital assets to a partner upon the dissolution of a partnership firm does not constitute a 'transfer' and is therefore not taxable as capital gains.
When a partner retires from a partnership firm and receives consideration, including a proportionate share of goodwill, it is not considered a transfer for capital gains tax purposes.
The distribution, division, or allotment of assets of a firm to its partners upon dissolution is a mutual adjustment of rights and not a sale, exchange, or transfer of assets, thus not attracting capital gains tax.
Sums received by a partner on retirement, representing balances in their capital or current account, are not taxable as capital gains as they do not constitute a 'transfer' of interest in the firm's assets under Section 2(47) of the Income Tax Act.
A delay in investing in Section 54EC bonds can be condoned, and the deduction shall not be disallowed, particularly when the bonds were unavailable in the market within the prescribed period from the date of transfer. The Assessing Officer is directed to verify the facts and allow the deduction under Section 54EC.
